The euro debt crisis is still not over. Several articles of a collective volume on ‘From Crisis to Growth?’, edited by Hansjörg Herr and others, deal with European imbalances and private and public debt. For more information see the webpage at Metropolis.
My article in this book – “Germany – best practice for the euro area? The Janus-faced character of current account surpluses” – deals with the crisis from the specific perspective of Germany as a rare example of a European country that is seemingly in an excellent economic position. If so, then Germany might be a case of best practice other member states should follow. This would be a misjudgement though. Increasing current account surpluses after the introduction of the euro did not lead to prosperity in Germany. On the contrary, they were accomplished by GDP growth rates below the European average, the establishment of a low-paid sector and poor and sometimes even negative real wage growth rates. Moreover, wage restraint in Germany contributed to a decline of price competitiveness of other member states and thus amplified European imbalances. During the crisis, a partly and temporary departure from this policy approach fostered a fast recovery and an increase in employment. It was brought about by an active stabilisation policy, demand from Asia and limits to external flexibility in the labour market. This is what the article elaborates on.